Key points
- The Bill is divided into three schedules. Schedules 1 and 2 in this Bill are substantially the same as Schedules 1 and 2 of the Social Services Legislation Amendment (Workforce Incentive) Bill 2022, which was introduced to Parliament in February 2022 by the previous Government. These schedules are likely to have bipartisan support.
- Schedule 3 deals with the Work Bonus. It makes changes to the Social Security Act 1991 and the Veterans’ Entitlements Act 1986 to improve financial incentives for pensioners to engage in paid work by temporarily adding $4,000 to eligible pensioners’ income bank balances.
- The increase to the Work Bonus has support from groups representing older Australians and industry. However, some of these groups argue that the changes should go further.
- Information provided to the Minister by the Department of Social Services (DSS) suggests the impact of the measure on work participation may be small.
Introductory Info
Date introduced: 28 September 2022
House: House of Representatives
Portfolio: Social Services
Commencement: Schedules 1 and 2 commence on the later of 1 January 2023 and one month and a day after Royal Assent.
Schedule 3 commences on 1 December 2022, if the Act
receives Royal Assent before 25 November 2022. However, if the Act receives
Royal Assent on or after 25 November 2022, Schedule 3 will commence on the
seventh day after Royal Assent.
Purpose of
the Bill
This Bill amends the Social Security Act
1991, the Social
Security (Administration) Act 1999 and the Veterans’
Entitlements Act 1986 to improve incentives for recipients of Age Pension,
Disability Support Pension (DSP), Carer Payment and veterans’ entitlement
recipients over Age Pension age to engage in paid work.
Structure of the Bill
The Bill is divided into three schedules:
- Schedule
1— Suspension of benefits and entitlements instead of cancellation
- Schedule
2—Extended qualification for pensioner concession cards
- Schedule
3—Pensioner work bonus temporary increase.
Schedules 1 and 2 in this Bill are substantially the same
as Schedules 1 and 2 of the Social
Services Legislation Amendment (Workforce Incentive) Bill 2022. That Bill
was introduced into the House of Representatives on 10 February 2022 by the
previous Government and lapsed when the House was dissolved ahead of the
election on 21 May 2022.
Schedules 1 and 2 are likely to have bipartisan support.
Committee
consideration
Senate Standing Committees on Community
Affairs
The Bill has been referred to the Senate Standing
Committees on Community Affair for inquiry and report by 10 November 2022.
Details of the inquiry are at the inquiry
home page.
Senate
Standing Committee for the Scrutiny of Bills
The Scrutiny of Bills Committee has not reported on the
Bill at the time of writing.
Financial
implications
According to the Bill’s Explanatory Memorandum, the
financial impact of the amendments is:
- Amendments
to increase pension flexibility: $8.4 million (indicative saving) over the
forward estimates from 2022–23.
- Amendments
to temporarily increase the work bonus income bank: $55.1 million (indicative
cost) over the forward estimates from 2022–23.[1]
Statement
of Compatibility with Human Rights
As required under Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the
Bill’s compatibility with the human rights and freedoms recognised or declared
in the international instruments listed in section 3 of that Act. The
Government considers that the Bill is compatible.[2]
Parliamentary
Joint Committee on Human Rights
The Parliamentary Joint Committee on Human Rights has not
reported on this Bill at the time of writing.
Schedules 1
and 2—measures carried over from the Social Services Legislation Amendment
(Workforce Incentive) Bill 2022
Background
The purpose of Schedules 1 and 2 is to
extend the period before payment of certain social security and veterans’
income support payments is cancelled and concessions are lost where the payment
rate is nil due to income as an employee.
If an Age Pension recipient has a change in income that
takes them above the relevant threshold for payment and they have used up their
Work Bonus, their pension is generally cancelled.[3]
This means they lose access to the pensioner concession card, and if their
income subsequently reduces below the threshold, they have to reapply for the
pension.
However, if the recipient or their partner has employment
income that reduces their payment to nil, their pension is only suspended for
up to 12 weeks, meaning payment can be restored if their income reduces in this
period without their having to reapply.[4]
They also retain eligibility for the pensioner concession card in this period.[5]
DSP recipients who commence work of 30 or more hours per
week where wages are at or above the relevant minimum wage, or have income or
increased income from employment reducing their DSP payment to nil rate, can
have their payment suspended for up to 2 years.[6]
Their partners may also be eligible to have their payment suspended rather than
cancelled if they lose payment because of this employment.[7]
The DSP recipient retains their pensioner concession card for 12 months
during this period of suspension, however their partner only retains their card
for the period relevant to their payment.[8]
For example, for a Carer Payment recipient this is 12 weeks.[9]
Continued eligibility for veterans’ fringe benefits, such
as health care, vary depending on the particular circumstances, but in some
cases eligibility is retained for a period even if the income thresholds are
exceeded. For example, eligibility for the Gold Card is retained for 13 weeks
if the income level is less than 150 per cent of the cut-off limit, while eligibility
for the pensioner concession card ceases immediately when the income exceeds
the cut-off.[10]
Potential impact of the changes
In June 2022, 78,000 of the 2.6 million Age Pension
recipients had earnings from employment in the last fortnight.[11]
For DSP, 52,400 recipients had earnings from a total of 765,000 recipients.[12]
For both payments, the majority (65,500 of the Age Pensioners and 37,000 DSP
recipients) had earnings over $250 in the fortnight. Some 5,500 Age Pensioners
and 2,300 DSP recipients were on zero rate payment, that is, had their payment
suspended.[13]
Equivalent data is not available for recipients of veterans’ payments, but the
total number in receipt of a service pension or income support supplement in June
2022 was less than 107,000.[14]
It is unclear how many of those not currently earning
income are likely to enter the workforce as a result of these proposed changes.
There may be more incentive for those earning significant income already and
those with their payment currently suspended to continue in employment or
increase their earnings.
In discussing the previous Government’s Bill, former Minister
Ruston stated that National Seniors and COTA had been telling the government
that the barrier for pensioners taking up more employment was the ‘health care
card situation’.[15]
The Department of Social Services noted that the modelling suggested these
proposed changes would result in 1,000 pensioners a year working more.[16]
Given that in August 2022 there were over 470,000 job vacancies across Australia,
it appears that these measures will have limited impact on reducing workforce
shortages.[17]
Schedule 1—Suspension of benefits and entitlements rather
than cancellation
Item 1 of Part 1 inserts proposed section 95D
in the Social Security (Administration) Act to extend the period of
suspension from 3 months to 2 years for Age Pension recipients where the
pension ceases to be payable because the pension rate has become nil.[18]
This provision only applies where the income used to determine payability
includes ‘income for remunerative work performed by the person in Australia as
an employee in an employer/employee relationship’ (proposed paragraph
95D(1)(f)).
The extension will also apply to those who have had their
pension cancelled under the existing provisions (that is, after the expiry of 3
months) if their income falls sufficiently to receive the Age Pension within
two years of the original suspension (proposed subsection 95D(4)).
Similar provisions apply where the person has failed to notify the Department
of the relevant income‑related event, and the Department has subsequently
become aware of the event and cancelled payment (proposed
subsection 95D(5)).
As the measure is intended to address workforce issues in
Australia, the decision to suspend can only be made if the person is residing
in Australia at the time of the decision (proposed subsection 95D(6)).
Items 2 to 16 of Schedule 1 of the Bill propose
amendments to the Social Security (Administration) Act to clarify the commencement
date of suspension of DSP where the recipient ceases to qualify because they
have obtained paid work for at least 30 hours per week, or DSP ceases to be
payable as a result of employment income. The amendments in these items also
clarify when a ‘resumption determination’ (that is, a determination that the
DSP is payable) takes effect and that it can apply retrospectively.
Item 17 inserts proposed section 97C into
the Social Security (Administration) Act to extend these suspension
arrangements to the partners of Age Pension, DSP and certain veterans’
entitlements, who are themselves receiving Age Pension, DSP or Carer Payment,
where their entitlement would otherwise have been cancelled for the same reason
as their partner’s receipt has been suspended. Proposed subsection 97C(7)
extends this provision to the partner even if the partner ceases to be a member
of the couple following the event or change of circumstances that resulted in the
partner’s service pension or income support supplement ceasing to be payable.
Application arrangements for the above items are detailed
in Item 18. In particular, the suspension provisions are extended to
those who have had their pension suspended in the 12 weeks prior to
commencement.
Item 21 inserts proposed section 56ED in the
Veterans’ Entitlements Act, so that recipients of service pension,
income support supplement and veteran payment have their entitlement suspended
rather than terminated, where their rate of payment is nil due to an event or
change of circumstances. In these circumstances at least some of the income of
the person must include income as an employee in Australia (proposed
paragraph 56ED(1)(f)). Provisions consistent with those amendments in the
Bill relating to the Age Pension are also inserted by item 21, namely
provisions regarding recipients who have had their payment cancelled under
current arrangements, and requiring that the person be resident in Australia.
Proposed subsection 56ED(8) provides that the
suspension ends and the pension, supplement or payment is cancelled 2 years
from the date of suspension, but notes that suspension may be ended by the
Repatriation Commission if the person’s pension, supplement or payment is
payable. That is, that the income has reduced to below the threshold for
payment within the 2 year period.
Similar to Item 17, proposed section 56EE extends
suspension to a recipient of a service pension, income support supplement or
veteran payment, where their entitlement has been lost because their partner
has had their payment of an Age Pension, DSP or veteran entitlement suspended
due to employment income.
Item 25 extends these new arrangements to those
whose payment ceased in the 12 weeks before commencement of these
provisions.
Schedule 2—Extended qualification for pensioner concession
cards
The pensioner concession card provides access to cheaper
health services and medicines, as well as a range of other concessions,
particularly through state and territory governments, such as in relation to
public transport and utilities.[19]
Parts 1 and 2 of this Schedule seek to amend the Social
Security Act to extend the qualification for a pensioner concession card to
align with the arrangements for suspension of entitlement. In evidence provided
to Senate Estimates, former Minister Ruston stated that advice from peak bodies
was that the loss of the health care card was a key barrier to pensioners
earning more income.[20]
Item 1 inserts proposed section 1061ZCA to
extend the qualification for a pensioner concession card for up to 2 years for
Age Pensioners and their partners, where the rate of pension is nil due to an
event or change in circumstances, and where the income tested includes earned
income in Australia. This aligns with the provisions for suspension of
entitlement in Schedule 1. Proposed subsections 1061ZCA(6) and (7)
ensure that the pensioner concession card is only available to those residing
in Australia, or in Australia and receiving a pension under the social security
agreement with New Zealand.
Item 4 specifies that this provision applies to
those who have had their pension suspended within the 12 weeks prior to
commencement, as well as those whose suspension is on or after commencement.
Items 5 to 16 amend section 1061ZD of the Social
Security Act, which covers the eligibility of DSP recipients to a pensioner
concession card when payment has been suspended due to employment. Currently,
DSP recipients whose payment had been suspended for employment reasons are only
eligible to receive the concession card for 52 weeks, even though their pension
could be suspended for up to 2 years. Items 7 and 13 extend eligibility
to 2 years, consistent with the suspension provisions.
To ensure that those who have had their pension suspended
prior to commencement are not disadvantaged, Item 17 provides that those
who have had their payment suspended within the 52 weeks prior to
commencement will also have their eligibility for the concession card extended
to 2 years from the date of suspension.
Part 3 seeks to amend the Veterans' Entitlement Act
to extend the period of eligibility for fringe benefits for those receiving a
service pension or income support supplement and their partners, where their
payment has been suspended due to employment income. Fringe benefits can
include access to medical treatment as well as concessions such as those
available to pensioner concession card holders. Specific benefits are
determined by the particular circumstances of the recipient (for example, see
Part V of the Veterans Entitlement Act).
Item 21 adds proposed subsections (3) and (4) to
section 53A of the Veterans’ Entitlements Act to extend
eligibility for fringe benefits for up to 2 years for recipients of service
pension or income support supplement, where payment has been suspended due to a
person’s income reduced rate becoming nil and where the income tested includes
employment income. Proposed subsections 53A(5) and (6) provide the same
benefits for the partners of these recipients, where the partner was previously
in receipt of fringe benefits or a pensioner concession card.
Items 22 and 23 add notes to clarify that those who
cease to receive a service pension or income support supplement are not
generally eligible for fringe benefits.
Eligibility for the extension of entitlement to fringe
benefits is also provided to those whose service payment or income support
payment ceases due to employment income up to 12 weeks prior to commencement (Item
26).
Part 4 covers the entitlements of those in receipt of Age
Pension, DSP or Carer Payment, whose partner was receiving a veteran service
pension or income support payment and payment has ceased due to employment
income.
Proposed section 1061ZBD of the Social Security
Act provides that where Age Pension, DSP or Carer Payment ceases to be
payable because of the earned income of the recipients’ partner, they retain
eligibility for the pensioner concession card for up to 2 years. As above,
these provisions align with the suspension arrangements contained in Schedule 1
of the Bill. Proposed subsections 1061ZDB(4) and (5) impose the
same residency requirements as apply in Item 1. Item 30 extends
eligibility for these provisions to those who have had payment suspended up to
12 weeks before commencement.
Schedule
3—Temporary increase to the Pensioner Work Bonus
Background
The Work Bonus is designed to encourage pensioners to earn
additional income from work. It does this by modifying the income test.
The Work Bonus provisions in the Social Security Act
apply to recipients of Age Pension, Carer Payment and Disability Support
Pension who have reached Age Pension age (section 1064 and subsection
1073AA(1)).
The Work Bonus provisions in the Veterans’ Entitlements
Act apply to recipients of a Service Pension or Income Support Supplement
who have reached qualifying age (subsection 46AA(1)).
The income
test
Income support payments such as the Age Pension and
Veterans service pensions are subject to a fortnightly income test. Recipients can
receive a certain amount of non-pension income without it affecting their
pension. However, the income test will reduce their pension by 50c for every
dollar they receive above this amount.
The amount a pensioner can receive without it affecting
their pension is known as the income free area. The rate at which the pension
is reduced is called the taper rate. The point at which a pensioner’s payment
is reduced to zero is called the cut off point.
For most single social security pensioners, the income
free area is $190 for a single person and the taper rate is 50c in the dollar. This
leads to a cut off point of $2,243.[21]
Different amounts apply to couples.
The definition of income is broad. It includes income
earned from work and income from investments.[22]
The Work
Bonus
The Work Bonus allows pensioners to earn additional income
from work without this income reducing their pension. It does this by moving
away from a fortnight by fortnight assessment of work income.
One way to encourage pensioners to engage in paid work would
be to increase the income free area. However, this would be a relatively blunt
tool for raising work levels because the income test applies to income from
investments and other non-work sources as well as work income.
Raising the income free area would also create stronger
incentives for pensioners to engage in regular part-time work but less
incentive to engage in shorter spells of full-time time work. One of the effects
of applying the income test on a fortnightly basis is that pensioners who earn
a relatively large amount of income over a few fortnights can lose more of
their pension than those who earn the same income spread over a larger number
of fortnights.
The Work Bonus scheme attempts to deal with both of these
problems. The scheme gives every pensioner an ‘income bank.’ Every fortnight
each pensioner is allowed $300 of work income free of the income test. The
income bank is similar to the income free area but is different in three important
ways.
- Firstly,
the income bank applies only to income from work.
- Secondly,
pensioners can ‘bank’ the unused portion of the fortnightly $300 and use it
later.
- Thirdly,
the unused amounts accumulate in the income bank, but only up to a limit of $7,800
(the maximum amount of Work Bonus credit it is possible to accumulate over a
year).
A single pensioner with an income balance of zero could earn
up to $490 every fortnight without having their pension reduced (assuming they
have no non-work income). This $490 includes the $300 credited to their income
bank every fortnight and the $190 fortnightly income free area.
However, another way a pensioner can use the Work Bonus is
to build up a balance in their income bank and use this balance to cover
fortnights where they earn significantly more than $490. Unlike the income free
area, the Work Bonus allows pensioners to ‘save’ and then ‘spend’ their fortnightly
credit.[23]
The Work Bonus is designed to allow pensioners to take
advantage of seasonal or temporary work. As financial planning professional
Brenton Miegel explained to the Daily Telegraph:
… if you want to do seasonal work – whether that’s being a
Santa Claus, fruit picking or harvesting – the Work Bonus can allow people over
age pension age to work for four to six weeks (full-time) and not see any
reduction in their pension.[24]
Proposals
to expand the Work Bonus
In a December 2021 pre-budget submission, the Australian
Chamber of Commerce and Industry (ACCI) argued there ‘is an army of older
workers with the skills Australia needs who would still like to work, but don’t
participate in the workforce as it reduces their pension.’ ACCI recommended a
number of changes including an increase in the Work Bonus:
To entice aged pensioners back into the workforce, the income
free threshold and work bonus should be raised to allow pensioners to keep more
of their pension when they earn income. In addition, to address the current
skill shortage, as a temporary measure until June 2023, consideration should be
given to allow Australians who are already in receipt of the aged pension as at
1 January 2022 to earn at a significantly higher rate before their age pension
begins to be reduced, with the aim of bringing pensioners back into the
workforce for 2 to 3 days per week.[25]
In a December 2021 media release, national, state and
territory chambers of commerce argued that getting older skilled workers back
into the labour force would help make up for the lack of skilled migrants
caused by border closures during the COVID-19 pandemic.[26]
COTA, a group representing older Australians also
recommended an increase in the Work Bonus in its pre-budget submission.[27]
Coalition
proposal to double the Work Bonus
In June 2022, Opposition Leader Peter Dutton proposed
boosting the Work Bonus by increasing the fortnightly amount credited to each
pensioner’s income bank from $300 to $600. He said the proposal was ‘designed
to increase labour supply, will ease workplace shortages and put downward
pressure on inflation and interest rates.’[28]
Government
proposal to boost the Work Bonus
In September 2022 the Government held a Jobs and Skills
Summit that brought together unions, employers, civil society and governments
to discuss issues such as skills shortages.[29]
In response to discussions at the Jobs and Skills Summit
the Government agreed to a ‘one-off income credit so that Age Pensioners who
want to work can earn an additional $4,000 over this financial year without
losing any of their pension.’[30]
Related Bills
before the Parliament
In addition to this Bill, there are two other Bills
currently before the Parliament that propose similar changes:
The Social Services Legislation Amendment (Enhancing
Pensioner and Veteran Workforce Participation) Bill 2022 was introduced as a
private Senator’s Bill by Senator Dean Smith. This Bill includes amendments for
the Coalition’s proposed changes to the Work Bonus, as well as two measures
(essentially the same as Schedules 1 and 2 of the current Bill) carried over
from the Social Services Legislation Amendment (Workforce Incentive) Bill 2022.
The Social Services and Other Legislation Amendment
(Lifting the Income Limit for the Commonwealth Seniors Health Card) Bill 2022
is a Government Bill that has been amended by the Senate to incorporate all
three schedules of Senator Smith’s private Senator’s Bill. These amendments
were supported by Coalition senators as well as independent Senator David Pocock,
the Jacqui Lambie Network and the Australian Greens.[31]
There are substantial differences in the proposed changes
to the Work Bonus in this Bill compared to those included in Senator Smith’s
Bill which are discussed below.
Key issues
and provisions
Effectiveness
It is not clear that a one-off increase to the Work Bonus
will be effective at encouraging pensioners to increase their participation in
the labour market.
The Department of Social Services (DSS) briefed Minister
Rishworth on the Coalition’s proposal in August 2022 (prior to the Jobs and
Skills Summit).[32]
According to the briefing:
There is no evidence to suggest increasing the Work Bonus
would incentivise retirees back into the workforce:
- Pensioners
already have the opportunity to earn a significant amount of income from work
without affecting their Age Pension and currently 97 per cent of pensioners
choose not to work.
- The
number of pensioners reporting income from employment is in long-term decline
despite an increase in the value of the Work Bonus concession of $50 per
fortnight (to $300 per fortnight) in 2019.
- The
low number of pensioners undertaking work and the lack of take-up of the Work
Bonus indicates pensioners are likely not working due to other factors, such as
a desire to be retired, physical impairments, and the type of work available.
This is supported by the findings of the 2020 Retirement Incomes Review.[33]
During committee hearings on Senator Smith’s Bill, a
Treasury officer suggested that while financial incentives may not be effective
at encouraging older people back to work, they may be effective at encouraging
those already working to work more hours.[34]
Explanation
of the provisions
Schedule 3 of the Bill makes changes to the Social
Security Act and the Veterans’ Entitlements Act.
Provisions for the Work Bonus in the Veterans’
Entitlements Act mirror those in the Social Security Act with only a
few minor differences.
The Work Bonus provisions in the Social Security Act
apply to recipients of Age Pension, Carer Payment and Disability Support
Pension who have reached Age Pension age (section 1064 and subsection 1073AA(1)).
The Work Bonus provisions in the Veterans’ Entitlements
Act 1986 apply to recipients of a Service Pension or Income Support
Supplement who have reached qualifying age (subsection 46AA(1)).
Changes to
the Social Security Act
Item 1 inserts proposed section 1073AC at
the end of Division 1AAA of Part 3.10 of Chapter 3 of the Act.
For each person with a Work Bonus income bank, the effect
of proposed section 1073AC is to temporarily add $4,000 to their income
bank balance.
Currently subsection 1073AB(2) limits income bank balances
to $7,800. To enable those with income bank balances above $7,800 to receive
the full additional $4,000 credit, proposed subsection 1073AC(6)
temporarily increases the income bank limit to $11,800.
When the temporary increase period ends on 30 June 2023,
the income bank limit of $7,800 is reinstated. Proposed subsections
1073AC(7) and 1073AC(8) reinstate the $7,800 income bank limit at
the end of the temporary increase period. Any person with a Work Bonus income
bank bonus above $7,800 will have their balance reset to $7,800.
Changes to
the Veterans’ Entitlements Act
Changes to the Veterans’ Entitlements Act mirror
those to the Social Security Act and are explained in detail in the
Explanatory Memorandum to the Bill.
Position of
major interest groups
By increasing the Work Bonus the Government is responding
to calls from two separate stakeholder groups; groups representing older
Australians and groups representing employers. Both sets of groups support an
increase to the Work Bonus but want the Government to do more.
For groups representing older Australians, an increase in
the Work Bonus represents a partial relaxation of the Age Pension income test.
Even if the policy fails to increase the number of hours pensioners work it
will financially benefit pensioners who currently work and are losing some of
their pension due to the income test.[35]
For groups representing employers an increase in the Work
Bonus represents a potential expansion of the labour force. If more pensioners
begin looking for work or seek to increase their hours of work, this might help
reduce labour and skill shortages. Labour and skill shortages became a high
profile issue after immigration was restricted in response to COVID-19.[36]
Think tanks
Commentators associated with the Institute of Public
Affairs (IPA) have promoted reform of the Work Bonus as a policy that benefits
pensioners, employers and Government.[37]
IPA adjunct fellow Cian Hussey proposed an unlimited Work Bonus as a solution
to the rising costs of an ageing population:
Perhaps the single best option for tackling these issues is
to provide an unlimited Work Bonus which would allow pensioners to earn as much
as they want from work and just pay income tax on that income like everyone
else. This is not to suggest a universal pension - eligibility would still be
subject to an assets test but to remove the punishing disincentives to work
currently faced by pensioners.
Getting more pensioners to work is the only way of defusing
the massive fiscal pressures currently building up.[38]
The IPA proposed an unlimited Work Bonus as a policy
option in an August 2022 research brief.[39]
IPA staff have argued that the cost of Senator Smith’s proposed doubling of the
fortnightly Work Bonus credit ‘will be more than offset through higher tax
revenues which result from having more Australians working and earning a wage.’[40]
Industry
groups
Hancock Prospecting Pty Ltd (HPPL) has also pushed for an
unlimited Work Bonus. In a submission on Senator Smith’s Bill, HPPL argued:
Increasing the Work Bonus without limit, would be a
win-win-win-win policy.
It will be good for pensioners and veterans, giving them more
freedom and opportunity, allowing them work without onerous paperwork, and not
be punished for choosing to work.
It will be good for businesses who can fill vacancies,
increase their productive capacity, and make use of the experience and
knowledge of older workers who might otherwise stop working.
It will be good for the economy as it will increase economic
activity and both the supply of and demand for goods and services.
And it will be good for state and federal budgets, increasing
income tax, payroll tax, and GST receipts.[41]
In keeping with the position it adopted before the Jobs
and Skills Summit, the Australian Chamber of Commerce and Industry (ACCI) has
supported the increase to the Work Bonus.[42]
The Victorian Chamber of Commerce and Industry has argued
that the Government’s changes to the Work Bonus are too limited. In a
submission to the inquiry on the Bill, the Chamber argued:
At the very least, the Work Bonus should be extended to 2025,
giving pension recipients and businesses more certainty, and then reviewed on a
two-yearly basis to assess cost of living and skill shortage pressures, if the
option for a permanent measure is unviable.
We also recommend that the Work Bonus is increased to
$10,000. The Bill currently increases the Work Bonus by $4,000, equating to an
approximate $150 extra per fortnight and extra seven hours of work per
fortnight (at minimum wage), until a person's age pension payments are reduced.
This number is conservative, significantly restricting pension recipients who
want to work more and businesses who really need staff.
While the Work Bonus helps to increase workforce
participation, it also increases complexity for pension recipients and
employers. Another way to increase workforce participation and earnings for
pension recipients is to have the option of working a number of days OR the
Work Bonus and income tested cap, which ever lets the worker earn more. This
reduces complexity and increases certainty for both workers.[43]
The National Farmers Federation (NFF) compared the changes
to the Work Bonus in this Bill with those in Senator Smith’s private Senator’s Bill
and recommended a combination of both measures:
The NFF would recommend the committee consider a one off
increase to the income credit with the flexibility that it provides, at the
level of $7,800, which is the accumulated value of lifting the work bonus to
$600 for 12 months. This would see that pensioners benefit from the best
aspects of both bills.[44]
The Housing Industry Association proposed that the Work
Bonus be kept in place until at least 2024 and that the Government ensure the
changes are communicated to pensioners.[45]
Groups
representing older Australians
Overall, groups representing older Australians have supported
an increase to the Work Bonus.
National Seniors Australia welcomed the proposal to
temporarily increase the Work Bonus limit by $4,000. However, it argued that
the policy is ‘suboptimal’ in some regards because it:
… perpetuates deficiencies in the existing pension rules.
The first is the size of the income exemption. Feedback
received from businesses and pensioners is the $4,000 limit will be too small
to make a material difference to workforce availability. This is particularly
the case for those engaged in or wanting to work consistent hours.
The second is it does not remove the complexity of the
current system. Income limits and reporting rules are difficult to comprehend.
Retirees are naturally risk averse when it comes to their pension and are
rightly concerned about employment income affecting their pension entitlement.
Pensioners also find the constant reporting to Centrelink onerous and
disheartening. This means many pensioners will remain discouraged from
participating in the workforce or will choose to work for cash to avoid negative
financial impacts.
The third issue is the policy does not give adequate time to
promote the scheme, which could undermine the response, leading to limited
uptake. To be effective, government will need to ensure this change is clearly
communicated to pensioners and businesses. Even with this, we are concerned the
ongoing complexity will discourage most from working.[46]
National Seniors has proposed ‘a 2-year trial of an
economy wide opt in exemption from the income test for pensioners.’ The
organisation supported its proposal with modelling commissioned from Deloitte.[47]
COTA supported an increase in the Work Bonus in its
2022–23 arguing that it should be extended until the individual earns the
equivalent of the minimum adult wage.[48]
An article published on the Combined Pensioners and
Superannuants Association’s website expressed scepticism about the
effectiveness of an increase in the Work Bonus:
Clearly, the incentive for a pensioner to participate in Work
Bonus was a powerful one even before the Government increased the cap by $4,000
over seven months. Yet only three per cent of pensioners avail themselves of
this opportunity. Will an additional annual benefit of $4,000 unleash a grey
army of hundreds of thousands of workers where the previous net benefit of
$7,800 produced only 75,000 soldiers? Probably not.[49]
Policy position of non-government
parties/independents
It is not clear what position the Coalition, minor parties
and independents will take on Schedule 3 of the Bill. As noted earlier, the
Senate amended the Social Services and Other Legislation Amendment (Lifting the
Income Limit for the Commonwealth Seniors Health Card) Bill 2022 to include the
Work Bonus measure in Senator Smith’s private Senator’s Bill.